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Wednesday, August 11, 2004

Indiana Decisions - Trial Court Decides Bingo Rulemaking Flawed [Updated]

"Rules to aid bingo charities are overturned" is the headline to this story today in the Indianapolis Star. For starters, some quotes from the story:

Bingo halls across Indiana hit the jackpot Tuesday when a judge quashed new state regulations that would have required them to give more money to charity.

Marion Superior Court Judge David J. Dreyer threw out the rules, which were enacted last year but had not yet been enforced, on a technicality.

The Indiana Department of Revenue should have followed state law and submitted the rules to the nonpartisan Legislative Services Agency to determine the financial effect on bingo halls, Dreyer ruled. That's required by state law if the estimated economic impact of a new rule is greater than $500,000.

But Department of Revenue officials didn't think there was a financial impact, so they didn't submit the rules to the legislative agency. Wrong decision, Dreyer ruled. * * *

With the amount of money involved, Tuesday's injunction is a big victory for bingo supporters, said Marilyn Moores, an Indianapolis attorney representing bingo halls. "In a lot of towns in Indiana, bingo is the hub of social life for a lot of senior citizens," said Moores, who expects state officials to appeal.

The Indiana Law Blog last reported on this case over a year ago, on June 28, 2003. Access it here (the Star link no longer available). At that time the "the Revenue Department and the Indiana attorney general's office agreed to stop enforcing the new regulations until a July 25 [2003] court hearing, said Kenneth L. Miller, commissioner of the Revenue Department."

I haven't seen any of the documents in the bingo case (but would like to), but the decision is reminiscent of the Indiana Supreme Court's ruling in Indiana Family & Social Services Adm. v. Walgreen (Ind.S.Ct. 5/28/02) (access the ILB summary/analysis here). There, in considering an FSSA rulemaking, the Supreme Court stated:

We agree with the trial court, therefore, that FSSA should have obtained an LSA fiscal analysis. The question then becomes, what is the proper remedy. Per IC 4-22-2-44, “A rulemaking action that does not conform with this chapter is invalid, and a rule that is the subject of a noncomplying rulemaking action does not have the effect of law until it is adopted in conformity with this chapter.” Before the permanent rule may take effect, therefore, FSSA must obtain LSA’s fiscal analysis.

Because the requirement does not attach until after preliminary adoption, FSSA need not go all the way back to square one. Rather, once it has obtained and properly considered an LSA fiscal analysis, it may resubmit the proposed rule to the Attorney General’s office and proceed toward permanent adoption should it so choose.

[More] Thanks to Marilyn Moores at Cohen & Malad, here is a copy of Judge Dreyer's 7-page order: Veterans of Foreign Wars v. Indiana Dept. of Revenue (8/9/04 Marion Superior Ct 10).

In addition, the Fort Wayne Journal Gazette also reported on the ruling today. Some quotes:

“The biggest thing is, we won,” said Gahan, whose post brought in $2.68 million from bingo in fiscal 2003. “I think it’s big that they did this illegally and they were telling (people) they did everything right.”

Gahan, whose organization was among six bingo operators that sued the state revenue department, cautioned that the fight is not over.

Revenue department deputy commissioner Larry McKee acknowledged the department could either appeal the decision or start the rules process anew. He spoke Tuesday shortly after learning about the court ruling and said no decision had been made on what steps might be taken. * * *

The new rules that were struck down this week would have regulated the percentages that parlors give to charities. They took effect in May and mandated that:

• Organizations holding bingo licenses that generate less than $150,000 a year give 5 percent to either themselves, outside community groups, or both.

• Organizations that generate between $150,000 and $500,000 give 8 percent.

• Organizations generating more than $500,000 must give 10 percent.

The rules applied to the overall money a parlor made, not what it reported after taking expenses into account.

Posted by Marcia Oddi on August 11, 2004 08:00 AM
Posted to Administrative Law & Decisions | Indiana Decisions